Brent jumps nearly 2 percent; U.S. gasoline stocks decline

Oil prices rose on Wednesday, led by gains of 2.5 percent in U.S. crude on a surprisingly big drop in weekly gasoline stockpiles and speculation that the glut of crude at the Cushing, Oklahoma hub could soon ease.

Weekly data from the U.S. Energy Information Administration showed that inventories at Cushing rose by only 35,000 barrels last week, below what some market players had expected. Still, overall crude stockpiles in the Midwest climbed to a record.

Additional support came from a steep 3.9-million-barrel drop in gasoline inventories last week as refinery output unexpectedly dipped.

"The report is supportive to prices due to the large decline in gasoline inventories," said John Kilduff, partner at Again Capital LLC in New York.

U.S. crude gained $2.25 to settle at $91.43 a barrel. Brent settled $1.42 higher at $101.73 a barrel.

Some traders linked the bigger rally in the U.S. market to a report from industry group Genscape late on Tuesday that showed BP increasing oil flow from Cushing into its Whiting, Indiana refinery, a sign that new units at the plant would restart soon.

Oil traders have been closely watching for the restart of the refinery, which is being upgraded to take more heavy crude from Canada and will drain supplies that have been weighing on U.S. futures.

Brent's premium to U.S. crude futures narrowed at one point on Wednesday to $10.24, the lowest since June, and has largely traded between $10 and $12 for the past three weeks.

Brent prices have tumbled nearly 8 percent and U.S. crude more than 6 percent since the beginning of April, reaching low prices attractive to buyers.

MACRO SIDELINED

The focus on domestic oil fundamentals overshadowed a weak March report on U.S. durable goods orders that weighed on U.S. equities for most of the day. Other global data was also gloomy, with growth in Chinese factories slowing to a crawl and German business activity falling for the first time in five months.

"The macroeconomic headlines were disappointing again, so if anything they'd be bearish, but the market doesn't seem to be concerned about that right now," said Stephen Schork, editor of The Schork Report in Villanova, Pennsylvania.

He said weaker retail gasoline prices were helping to stir consumer demand. Fuel prices were down slightly from last week but more than 30 cents lower per gallon than a year earlier, a daily survey by the American Automobile Association showed.

U.S. gasoline futures were up more than 1 percent at $2.75 after going as low as $2.70 this month. (Additional reporting by Robert Gibbons in New York, Peg Mackey in London, Florence Tan and Manash Goswami in Singapore; Editing by Jonathan Leff and Dale Hudson)